Gen Z & the digital consumer

Who are they?

As the second “digital native” generation, Gen Z has grown up with easy access to the internet and technology from a very young age. They are generally comfortable with technology, have a strong online presence, and are adept at using social media. This has shaped their attitudes, behaviors, and worldviews in distinct ways.

Beyond being digital-first, this group is also known for being socially conscious, valuing diversity and inclusion, and having a global mindset. They are often seen as being more pragmatic and realistic than previous generations, with a focus on financial stability and making a difference in the world.

With the pandemic as a generation-defining event for Gen Z, the experience shaped the way that Gen Z views and interacts with the world. This generation tends to be cautious with their finances, often preferring cash over other forms of payment as a tangible way to control their spending. Their wariness extends to traditional financial institutions as well, as they can often shy away from these, choosing instead to explore alternative financial services.

While Gen Z’s spending is currently only a small portion of overall consumer spending, they stand to become the fastest growing consumer segment. In short, Gen Z is expected to account for virtually all spending growth through 2035, meaning Gen Z is the consumer of tomorrow. Gen Z consumers were responsible for just 4 percent of spending in 2022 but their spending is expected to ramp up dramatically. By 2035 they are predicted to account for 23 percent of the spending base economy-wide. Their inflation-adjusted consumer outlays will increase by an average of 17 percent per year, more than five times as fast as any other population group. Said differently, Gen Z will account for virtually all spending growth through 2035. By the middle of the next decade, this group could represent a $4.2 trillion opportunity.¹

By understanding who they are and their financial behaviors, you can make the most of the growth trajectory they represent.

How are they spending?

• Split-brain budgeting² – Gen Z and young Millennials are increasingly adopting a “split-brain budgeting” approach, where they balance saving and splurging, often on eco-conscious choices.
• Less credit – Gen Z displays unique financial behaviors, such as less credit card usage, higher propensity to carry balances, and a preference for alternative debt management options like loans for consolidation.
• Social commerce – Gen Z and millennial consumers are more likely to initiate transactions via social media platforms, indicating a shift in consumer behavior that necessitates businesses to integrate with these platforms.

What are they looking for from a financial institution?

The characteristics that define this generation are also indicative of what they look for in a financial institution. Generally, they value those that are technologically advanced, transparent, and socially responsible.

Here are a few key things they typically look for:

1. Digital services: They prefer to conduct their financial transactions online or via mobile apps.
2. Transparency: They appreciate institutions that provide clear information about fees, rates, and terms without any hidden conditions.
3. Financial education: They appreciate institutions that provide resources and tools to help them understand and manage their finances better.
4. Social responsibility: They are likely to choose financial institutions that demonstrate a commitment to issues like sustainability and social justice.
5. Personalization: They appreciate financial institutions that offer personalized financial advice and solutions tailored to their specific needs.
6. Security: They expect financial institutions to have robust security measures in place to protect their financial information.

How to reach them

In the mission to engage the dynamic and digitally native Gen Z, community banks and credit unions hold a unique set of cards. By doubling down on financial education, embracing social responsibility, and fostering a community-driven approach, these institutions can tap into Gen Z’s core values and carve out a significant space in their digital-first mindset.

Armed with the insight that Gen Z practically lives on platforms like Instagram, TikTok, and Snapchat, it’s vital for community financial institutions to craft messages that resonate and capture attention within the fleeting attention spans. To effectively reach this audience, communications must not only be genuine but also packaged in easily digestible bites—short and sharp that appeal to the sense of social good and empowerment that Gen Z admires.

Community banks and credit unions can leverage this captive audience by producing content that does more than just speak—content that acts and inspires. Whether it’s thumb-stopping tidbits about managing finances or stories of how socially conscious investments yield real-world dividends, the message should be clear: here’s a financial friend who gets you and gets what matters to you.

It’s crucial to remember that Gen Z doesn’t just look for banking—they look for banking that understands the assignment, one that’s fluent in memes and mission, fusing digital solutions with the human touch of community spirit. By showcasing those authentic qualities, community banks and credit unions can not only reach but resonate with the most connected generation yet.

Footnotes:

¹ Visa Business and Economic Insights, U.S. Economic Insights, Searching for the consumer of tomorrow: The Gen Z opportunity, November 2023
² Visa Business & Economic Insights, Consumer Insights, Unlocking Gen Z’s mindset and consumer potential, February 2024

Other Sources:

• Get to know the Gen Z audience

• How they make payments

• How to reach them